Michael Cohen, Hush Money, and Trump’s Potential Criminal Liability

The U.S. Attorney for the Southern District of New York (the SDNY) recently filed its sentencing memo in U.S. v. Michael Cohen. That memo has led to substantial speculation over whether the SDNY has evidence that President Trump criminally violated the Federal Election Campaign Act (FECA). Many commentators believe that the SDNY does, particularly because the memo states that Cohen acted at the “direction” of President Trump. Commentators have also readily accepted the SDNY’s view that so-called hush money payments may qualify as contributions subject to FECA’s restrictions.

This post first examines which inferences may be properly drawn from the “direction” language. It then examines whether hush money payments qualify as contributions under FECA. It concludes that the legal issues here are far more nuanced than suggested by many commentators.

1. Direction by Trump. The SDNY memo describes two six-figure hush money payments, one from Cohen and one from American Media, Inc., to former Trump mistresses. These payments were apparently made to ensure that the mistresses remained silent about their affairs with the President. The SDNY memo argues that the payments were coordinated with the Trump campaign and were designed to influence the 2016 Presidential election.

The SDNY thus concludes that Cohen violated FECA. In its view, the hush money payments qualify as campaign contributions, and the restrictions on excessive contributions and corporation contributions applied to them. Thus, Michael Cohen violated FECA through his excessive contribution and through causing American Media, Inc. to make a prohibited corporate contribution. See52 U.S.C. § 30116(a)(1) (setting relatively small dollar limits on campaign contributions) & (a)(7) (treating expenditures made in coordination with a campaign as contributions to the campaign); 52 U.S.C. § 30118(a) (prohibiting corporate contributions and expenditures in connection with various elections); 18 U.S.C. § 2(b) (establishing criminal liability for willfully causing another person to perform an act that would be a federal offense if performed directly).

To buttress its conclusions, the SDNY ties the hush money payments to Cohen’s role with the Trump campaign. It also emphasizes that “as Cohen himself has now admitted, with respect to both payments, he acted in coordination with and at the direction of [President Trump].” See SDNY memo at 11 (citing probation report). That assertion apparently further shows that the hush money payments were intended to influence the election and were made in coordination with the campaign.

Some commentators believe that the SDNY would not include the “direction” language unless it had non-public evidence showing that the President directed the two payments. But, at least from the outside, it is unclear why the sentencing memo necessarily shows that. After all, in August, Cohen stated in open court that he arranged the payoffs “in coordination with and at the direction of a candidate [i.e., Trump].” SeeMichael Cohen Says He Arranged Payments to Women at Trump’s Direction, New York Times (Aug. 21, 2018). And the SDNY wrote the sentencing memo as an advocacy document, to rebut Cohen’s plea for leniency. With that in mind, it is hardly surprising that the SDNY would copy and paste Cohen’s admissions into the document. However, maybe federal prosecutors would not use a criminal defendant’s own words against him, absent an independent investigation into whether his admissions were accurate.

In any event, many now assert that the SDNY communicated its belief about Trump’s guilt through the “direction” language. See Chris Mills Rodrigo, Cohen filing means Trump committed two felonies, The Hill (Dec. 7, 2018) (collecting commentators’ statements). However, if the SDNY actually believes that Cohen’s admission establishes Trump’s guilt, it would be mistaken. As discussed in priorposts, a person criminally violates campaign finance law only if he knows that his behavior is unlawful. See52 U.S.C. § 30109(d) (describing criminal penalties for knowing and willful FECA violations). In other words, ignorance of the law provides a defense to prosecution. Thus, even if Trump directed Cohen to make or facilitate the hush money payments described in the SDNY memo (as seems to be the case, see here and here), that direction would be potentially criminal only if Trump knew that he was breaking the law.

This analysis does not change if the government proceeds under 18 U.S.C. § 2(b), rather than under 52 U.S.C. § 30109. Section 2(b) reaches a person who causes another to commit federal crimes, and it could potentially apply to someone who caused another to violate FECA. However, the defendant must “possess the mens rea required by the underlying statute.” United States v. Gumbs, 283 F.3d 128, 131 (3d Cir. 2002). Thus, if a defendant were prosecuted under Section 2(b) for causing another person to violate FECA, ignorance of the law would remain a defense.

The SDNY memo thus does not establish, as recently alleged in one newspaper article, that “Mr. Trump is effectively an unindicted co-conspirator in Mr. Cohen’s campaign-finance crimes.” See Charlie Savage, ‘A Simple Private Transaction’: Trump Lays Out a Defense in a Campaign-Finance Case, The New York Times (Dec. 10, 2018). Nor does the SDNY memo establish that Trump violated any campaign finance laws. To demonstrate that, the SDNY would need to show that Trump knowingly and willfully directed Cohen or others to violate the law.

2. Hush money payments as campaign contributions. The SDNY memo relies on a contested interpretation of campaign finance law. That is, the memo follows the approach advanced in the failed John Edwards prosecution, in which the government argued that hush money payments potentially qualify as campaign contributions. But some believe that the hush money payments described in U.S. v. Cohen are factually distinguishable from those in the Edwards case. If that is so, the harsh criticisms applied to the Edwards prosecution might not apply here.

But there are strong arguments that hush money payments, as a matter of law, are never campaign contributions. Nor should they ever qualify as proper campaign expenditures. Under this approach, embraced by at least one former government official, FECA could not properly criminalize hush money payments. See Bradley A. Smith, Michael Cohen Pled Guilty to Something That Is Not a Crime, National Review (Dec. 12, 2018).

Regarding the statutory framework, a contribution includes various payments or transfers “made by any person for the purpose of influencing any election for Federal office.” 52 U.S.C. § 30101(8). Indirect or “third-party” payments, like the ones at issue in U.S. v. Cohen, may qualify as contributions even though they are not transferred directly to the campaign or the candidate. See11 C.F.R. § 113.1(g)(6). They may even qualify if they would not reflect proper campaign expenditures. See id. However, third-party payments will not qualify as campaign contributions if they “would have been made irrespective of the candidacy.” Id.

The regulations do not specify whether hush money payments are deemed made “irrespective of” a campaign. However, provisions on improper campaign expenditures, which contain a similar “irrespective of” test, provide some indirect guidance. Under FECA, a campaign contribution cannot “be converted by any person to personal use.” 52 U.S.C. § 30114(b)(1). Personal use occurs when contributions are used for commitments, obligations, or expenses that “would exist irrespective of the candidate’s election campaign” or her official U.S. duties. 52 U.S.C. § 30114(b)(2). See also Fed. Election Comm’n v. Craig, 816 F.3d 829, 836-37 (D.C. Cir. 2016) (explaining how Congress drew “irrespective of” test from FEC regulations).

The statute reveals that some payments will not qualify as campaign-related, no matter the circumstances. See 52 U.S.C. § 30114(b)(2)(A)-(I). For example, if a candidate, as a direct consequence of her candidacy, enrolls in a course on campaign finance law and pays tuition for that course, that tuition payment will not qualify as a proper campaign expense. See 52 U.S.C. § 30114(b)(2)(G). It makes no difference that, as a factual matter, the payment would not have been made but for the campaign.

Whether hush money payments should be treated in the same way remains an open question. The items specified in the statute are illustrative, not exhaustive, of expenses automatically considered made for personal use. See also 11 C.F.R. § 113.1(g)(1)(i). One suspects that, if the FEC issued regulations on hush money payments, it would adopt an objective approach. That is, it would flatly state that those payments are always made “irrespective of” the campaign and would not qualify as proper campaign expenditures. Otherwise, candidates could use donors’ funds to pay off their mistresses. See also Richard Pildes, Why John Edwards Probably Did Not Commit A Crime, Regardless of His Motives or Those of His Donors, Election Law Blog (Jun. 4, 2011) (urging objective approach to campaign contribution classifications).

However, hush money payments might be analyzed under a subjective approach. That is, those payments might be examined individually to determine whether they were made “irrespective of” the campaign and not to influence the election. Under this approach, a hush money payment made to one mistress (such as John Edwards’) might not qualify as campaign contribution even though a hush money payment made to another person’s mistress (such as Donald Trump’s) would so qualify.

This subjective approach finds superficial support through the regulations. Under 11 C.F.R. § 113.1(g)(1)(ii), if an expense is not automatically considered personal under Section 113.1(g)(1)(i), its classification will be determined on a “case-by-case basis.” This arguably implies that hush money payments made to different mistresses may be treated differently under FECA.

However, the regulations “case-by-case” language does not necessarily displace objective analysis. For example, though the regulations state that legal expenses will be examined on a case-by-case basis, the FEC has adopted objective standards to aid its inquiries. In the FEC’s view, legal expenses will not qualify as proper campaign expenditures “‘merely because the underlying proceedings have some impact on the campaign or the officeholder’s status.’” Advisory Opinion 2009-20 (quoting 60 Fed. Reg. 7862, 7868 (Feb. 9, 1995)). Thus, legal expenses related to divorce will be personal, see 60 Fed. Reg. at 7868, even if a candidate could prove that her candidacy caused her divorce. However, the FEC has concluded that legal expenses will not be personal when “the legal proceedings involve allegations directly relating to the candidate’s campaign or duties as a Federal officeholder.” Advisory Opinion 2009-20.

The case law confirms the FEC’s ability to apply an objective approach to expenses described in 11 C.F.R. §§ 113.1(g)(1)(ii). That is, though the regulation refers to case-by-case analysis, that simply means that the FEC may delineate broad categories as it decides individual disputes, in the “common law tradition.” F.EC. v. Craig, 816 F.3d at 841. The FEC does not need to literally perform “a case-by-case analysis of [each] candidate’s or official’s rationale” for any given expense. See id. at 841 (rejecting claim that FEC must apply individualized approach to legal expenses; “that is not what ‘case-by-case’ must mean”).

The FEC should adopt this framework for confidentiality (hush money) payments. That is, when those payments arise from campaign actions, they should be treated as campaign expenditures. However, when those payments relate to a candidate’s adulterous or other romantic relationships, any resulting campaign payments should, like divorce expenses, automatically be treated as having been made “irrespective of” the campaign.

Under existing regulations, a third-party payment could conceivably qualify as a campaign “contribution” even if it is not applied towards a proper campaign expense. See 11 C.F.R. § 113.1(g)(6) (introductory language). That is, a third-party hush money payment might not have been made “irrespective of” the candidacy, even though the hush money expense would exist “irrespective of” that candidacy. However, to establish a coherent and sensible regulatory regime, the FEC should apply an objective test to both, analogous to the one used in Advisory Opinion 2009-20. When the hushed activities relate to campaign actions, or the actions of the candidate in her capacity as such, any hush payments should qualify as contributions. If the hushed activities do not relate to campaign or candidate activities, then any hush payments should not qualify as contributions under FECA.

In U.S. v. Cohen, the federal prosecutors did not apply this objective framework. Rather, they clearly believe, as they did during their widely-criticized prosecution of John Edwards, that a subjective approach applies and that hush money payments for adulterous relationships may qualify as campaign contributions. However, federal prosecutors’ views do not establish the meaning of the law even if a particular criminal defendant, such as Michael Cohen, acquiesces to those views. The SDNY memo thus offers only a glimpse of the factual and legal issues that must be wrestled with if a defendant resists prosecution for hush money payments. And if a court thoroughly wrestles with those issues, it should conclude that hush money payments do not qualify as campaign contributions under FECA and its implementing regulations.

Good analysis. One thing I’ve wondered about is the difference it makes if the expenditure is by the candidate himself. Suppose Trump paid for it all. Or suppose Edwards had paid his woman to keep quiet. In that case, it would be very hard to call it a campaign expense. There is also little reason (no reason?) to have a law reporting even real campaign expenses– we already know the candidate supports himself. If someone with no connection to the candidate, on the other hand, except for supporting his candidacy pays for some of his expenses, then even if those are not campaign expenses, the public should know. Otherwise, we could, for example, have maxed-out donor Smith make candidate Jones’s mortgage payments for him, and Jones could use the money he saved to buy TV ads.

A law question: What is the burden of proof for the mens rea? Would it be necessary to prove beyond a reasonable doubt that President Trump knew the payments were illegal campaign contributions? Or by preponderance of the evidence? Either one would be impossible, I think, since legal experts are divided and courts have not spoken on the subject. I doubt even Cohen thought they were campaign expenditures, even though it seems he has pleaded guilty to knowing it.
Yet another law question: what is the usual penalty for evading a million dollars in taxes? It sure seems here that Cohen has pleaded guilty to X, which he didn’t do, in order to receive leniency on Y, which he did do.

The regulations strongly imply that if the candidate himself or herself pays for a non-campaign expense, then s/he has not made a contribution to the campaign. See 11 C.F.R. § 113.1(g)(6) (introductory language).

As for burdens of proof, my understanding is that the prosecution would have to provide beyond a reasonable doubt that the defendant “knowingly and willingly” violated FECA.

On my last question, “What is the usual penalty for evading a million dollars in taxes? ” , I discovered that the Cohen prosecution sentencing memo says the total Guidelines setnence for his 4 offenses (tax evasion, lying to FBI, lying to Congress, bank reporting offense) was, I think, something like 52-64 months (about 5 years), which the probation dept recommended reducing to, I think, 42 months. Pretty close to those things,anyway.

Andrea Carr just tweeted, in reference to this article:
Well, here’s a fun, non tax article about mistresses.

I took up the implicit challenge:
Andrea, there’s *always* a tax angle. If Trump deducted the hush money as a business expense needed to protect his brand image, is that sufficient evidence it was not an in-kind campaign contribution? Is it still one if his deduction was improper, but he didn’t know it?